How much is your Social Licence costing you?

How much is your Social Licence costing you?

by Antony Sprigg, CEO ISCA

Social licence is not a new term. Quite simply, social licence to operate (SLtO) exists when a project, asset or organisation has the ongoing approval from stakeholders.

Stakeholders include the local community andongoing approvalis rooted in the beliefs, perceptions and opinions held by these stakeholders. It is therefore “granted” by the community and must be maintained. This definition paraphrases definitions and descriptions from experts like Dr Robert Boutilier and the ACCSR. The term was derived in the resource sector for new projects, however the underpinning principles and concepts are applicable not just for projects in the civil space, but operating assets and private and public organisations as well.

It is often perceived as intangible, however the consequences of a diminished social licence can have direct financial, reputational and political impacts - which are very tangible.The cancellation of the East West Link project in Melbourne, which is reported to have cost the tax payer anywhere from $300 million to $1 billion, along with sovereign risk, reputational and other impacts, is a visceral and recent example of what can happen when the social licence is not valued.

As highlighted with the East West Link example above, not appreciating and valuing the past and present social licence of your project, particularly at planning and procurement stages (as well as during construction and operations), can have significant direct short and long-term economic and financial impacts with knock on policy and political consequences. In fact it is highly likely that there is a project in your jurisdiction, organization or portfolio at the planning or procurement stage where delays and increased politicisation are occurring; caused through an eroding social licence.

Benchmarking, measuring and maintaining your social licence is not simply a matter of ensuring you have secured your regulatory approvals and undertaken and implemented stakeholder engagement requirements. In fact, assuming that if one has met the project approvals requirements then you are “good to go” that can cause a project to falter, empowering detractors and drastically diminishing the social licence.

It is important to highlight that social licence is very much about the perception of issues. These issues can be associated with legacy, current or future aspects and be directly or indirectly impacted through the project or asset. Issues could be related to a plethora of topic areas like liveability, environment, cost, construction or employment, to name a few. Stakeholder concerns may range from rational and justified to irrational and irrelevant. Regardless it all constitutes the social licence and if not appreciated and valued appropriately they will impact the project and associated organisations.

There are a number of processes and practices which as an investor, funder, procurer, contractor or operator you can adopt to better position your project or asset for success in the context of your social licence. They include:

Projects should resolve problems, provide benefits and mitigate impacts in the most sustainable way. A proposed project is more than a fly over video, benefit costs analysis and media statement. It is important that the full social, economic and environmental elements to the story are elucidated, compiled and articulated.

Value the whole of life triple bottom line benefits. Even if a project has a positive benefit cost ratio or equivalent financial outcome predicted, it is important to value quantitatively and qualitatively the other benefits at the business case stage predicted for construction and during operations. It is often these “other” benefits, which can derail detractors and can be attractive to local communities and broader stakeholders. These other benefits may include wider economic, value captured or environmental capital.

Environment and community perceived intangibles are core risks and opportunities. Ensure the perceived “intangibles” are not simply dealt with through traditional regulatory gateways, but considered as part of the core risks and opportunities from business case to procurement. This means that the project team can understand and own these issues. It also means that a proponent can potentially (and preferably) establish an early relationship with the regulator regarding key environmental and social risks as well as work collaboratively to resolve issues. This may result in expedited approvals and likely more engaged external stakeholders.

Consult with the public don’t tell them. Relying less on political style communications, which commonly take the form of “telling” the public about aspects of a project. Rather, adopting a more analytical and consultative approach, appreciating past and current stakeholder trends, concerns and expectations coupled, with iterative and more inclusive methods where communities can participate and inform elements of a project. Although some procurers and regulators perceive participatory processes as higher risk, in fact the less it is done the lower the social licence and therefore the greater the likelihood a project will fail or the approvals, procurement and construction processes will be protracted, adding significant costs and affecting future project proposals.

The Infrastructure Sustainability (IS) rating tool can be used beyond achieving project design, project as-built and asset operations sustainability ratings. Originally funded by Australian governments and the private sector, IS rating tool is now being widely adopted by industry and will soon to include Economic and Workforce elements.

More and more proponents are registering their project during business case and planning stages for IS rating technical support. Early registration enables proponents to identify and evaluate sustainability risks and opportunities; including what they should factor in planning and early design stages and what their expectations are following project procurement. This early adoption of the IS rating tool can also be used in the following ways:

Evaluate project’s story. Evaluate and inform the broader elements of the projects story, which can be used for enhanced internal and external stakeholder engagement.

Evaluate engagement. Evaluating the engagement methodologies applied to date and associated effectiveness for the project and its stakeholders.

Discover benefits. Identify, quantify and qualify the broader benefits of the project and input into the project “story”, external communications and the delivery and key performance indicators for the operational contracts.

Facilitate engagement. Facilitate engagement with key stakeholders like regulators early, prior to the formal approvals gateways, to collaboratively plan and design out risks and impacts rather than the traditional approach of adopting often expensive mitigation measures.

Corporate self-assessment. Utilise the IS self-assessment and rating process for your internal and external sustainability or triple bottom line corporate reporting or score card requirements. It can support materiality assessments, benchmarking and establishing objectives and targets, and obviously consequent reporting on outcomes performance.